market folly

Hedge fund legend Stanley Druckenmiller (formerly of Duquesne Capital) sat down with Bloomberg TV and says he sees "a storm coming, maybe bigger than the storm we had in 2008, 2010."  In this rare interview, he talks about entitlement spending, but also about hedge funds and investing.

He been outspoken on entitlement spending as of late and says there's a demographic bubble and that seniors are essentially stealing from future generations.  But below we wanted to highlight his comments on equities, hedge funds, and investing.


Druckenmiller on Hedge Funds, Investing & More

On equities versus bonds: "One of the things that is kinda one of my pet peeves is hearing all these people on TV say, 'Well, you gotta go into equities 'cause they're so cheap relative to bonds and there's no other game in town.'  They are cheap relative to bonds.  But everything is cheap relative to bonds…So just because equities are cheap relative to bonds doesn't mean their price isn't subsidized.  I'm not making a forecast here because the subsidization could go on for a long time.  But real estate, gold, equities, they're all priced off of ZIRP, zero interest rates, and they're all subsidized."


On hedge funds: "Oh, I don't know.  I think the hedge fund's short-term thinking is just a manifestation of our entire society.  Whether it's the fed or whether it's-- the administration or whether it's Congress, no one bothers to think about the long term anymore.  And the hedge funds are just one more manifestation of that."


On where to invest now: "That's hard for me to answer.  Because I have the luxury of a lot of experience in sitting in front of a screen.  And I can go into currency markets where it's at a relative price.  So it's the one area where prices aren't subsidized.  And I'm arrogant enough to think I can time these things.  But I don't really know how to answer that question for public invest-- but let me just say that this idea that you've got go plowing into risk because rates are zero, that they will rue the day one day.  The music will stop.  And I would probably be invested right now thinking I'm smart enough to know that we're quite away from the music stopping.  I don't think Bernanke is about to end these policies for a while.  But let's just know what we're dealing with here."


Embedded below is the video of Druckenmiller's interview with Bloomberg TV on entitlements and we'll update with the rest of the interview once it's uploaded: